THE Debt Management Office (DMO) has explained that decades of operating budget deficits by successive governments is responsible for Nigeria’s high debt profile.
The Director-General of the DMO, Patience Oniha, disclosed this to the News Agency of Nigeria (NAN) on Sunday, May 14 in Abuja.
Oniha said a review of Nigeria’s fiscal data showed that not only had the government operated growing budget deficits, most of the deficits had been funded through local and external borrowings.
The ICIR, on January 28, reported that the Budget Office of the Federation’s data analysis indicated that the total budget deficit was set to hit N47.43 trillion under President Muhammadu Buhari.
The analysis coverred the actual budget deficits and projections for the 2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, and 2023 fiscal years.
According to the figures, deficit financing had risen by 370.54 per cent from N2.41 trillion in 2016 to N11.34 trillion in 2023.
On March 30, two months later, The ICIR reported that Nigeria’s total public debt stock increased to N46.25 trillion, or $103.11 billion, in the fourth quarter of 2022.
The figure, according to the report, consisted of the domestic and external total debt stocks of the Federal government and the sub-national governments (36 state governments and the Federal Capital Territory).
Oniha, highlighting the implications to the News Agency of Nigeria (NAN), said recent records showed that deficits in the annual budgets, including supplementary budgets, rose to N10.78 trillion in 2023, from N1.62 trillion in 2015.
“Between 82 per cent and 99 per cent of these were funded by new borrowings, which ranged from N1.46 trillion in 2015 to N8.80 trillion in 2023.
“These facts confirm that these budget deficits, funded by new borrowings, have been responsible for the rapid growth in the debt stock and the resultant increases in debt service,” she said.
The DMO boss added that the trend could have been avoided or, at least, moderated if revenues had been higher or expenditures lower.
She tasked the incoming government of Bola Tinubu to take cognisance of the situation and prioritise increased revenue generation.
“The budget deficits would have been much smaller, or Nigeria would have operated on a balanced budget.
“It is, therefore, imperative that the incoming government takes into account the perennial budget deficits in the preparation of the Medium-Term Expenditure Framework (2024 – 2026) and the 2024 budget.
“The government should also accelerate the growth in revenues to ensure debt sustainability,” she said.
A report by The ICIR on January 18 had projected that every Nigerian would be owing N384,864 each when President Muhammadu Buhari leaves office on May 29, as the debt profile was expected to spiral to N77 trillion by the end of his administration.
Available data showed that 73 per cent of internal debts, which is about 60 per cent of the total debt stock, are government bond, saving bonds, treasury bills, sukuk and green bonds.
Of internal debts, 2.3 per cent is government’s promissory notes to companies issued export expansion grant.
Similarly, the World Bank, in its latest report, disclosed that Nigeria spent 96.3 per cent of its 2022 revenue on servicing its debts.
The report, which was on Macro Poverty Outlook for Nigeria and released in April 2023, noted that Nigeria’s fiscal position deteriorated in 2022, leaving the cost of petrol subsidy to increase from 0.7 per cent to 2.3 per cent of the gross domestic product (GDP).
“This has kept the public debt stock at over 38 per cent of the GDP and pushed the debt service-to-revenue ratio from 83.2 per cent in 2021 to 96.3 per cent in 2022,” the report read.
It further stated that the fiscal deficit was estimated at 5.0 per cent of the GDP in 2022, breaching the stipulated limit for a federal fiscal deficit of 3 per cent.
According to the World Bank, the oil price boom had supported the country’s economy, but this has changed since 2021.
Despite the high debt profile of the country under the Buhari administration due to excessive borrowing, the outgoing President is seeking another $800m World Bank loan.
The loan, according to Buhari, would help to alleviate the negative impacts of fuel subsidy removal.
He also claimed the loan facility was intended to be used to support poor Nigerians, and would be disbursed to poor households across the country.